Dreams die as Ovop loan hangs in the sky

Deep in the remote areas of Traditional Authority (T/A) Kanduku in Mwanza lives 42-year-old widow Mercy Jento whose future has been shattered by a loan she obtained to turn around her fortunes.

Without a steady means of earning a living, poverty-stricken Jento faces an uphill task to provide for her children, a frail mother and members of her extended family.

For her, every day brings a host of challenges to deal with.

“Life has not been easy for me. I face a lot of problems to feed and clothe my dependants,” said Jento.

At the heart of every human being is the desire to survive and prosper. It was this desire that lured Jento into joining 19 other villagers to form Msulauchi Beekeepers Cooperative Society that later accessed a multimillion kwacha loan from the One Village One Product (Ovop).

However, in less than a month influential members began leaving the group, citing prohibitive terms and conditions of the loan.

Jento said if not redesigned, the project will leave many households poorer. She said the interest rates Ovop is charging are beyond the reach of poor communities.

“Ovop is charging a 15-percent interest rate per annum. This is not a simple figure for a poor villager who expected to turn around her economic fortunes through this project. Whether the group is functioning or not, Ovop expects that we will pay all this. In fact, they have already started pestering us to start repaying the loan although we are not producing. Should we default, won’t they come to seize our property?” she said.

Secretary of the cooperative Nicholas Mmina said most members were suspicious of the terms and conditions Ovop laid down for the loan.

He said this led to the break-up of the group.

“People’s perception of Ovop is that it is a loan shark and not a tool for eradicating poverty,” said Mmina, who is now a symbolic secretary after the group folded.

Such suspicions have characterised the 10-year existence of Ovop, a concept government borrowed from Japan in 2003.

With assistance from the Japanese International Cooperation Agency

(Jica), Malawi introduced Ovop as a tool for eradicating poverty.

The initiative was expected to support economic empowerment of rural communities and contribute to the achievement of the Millennium Development Goals (MDGs) through value addition to raw materials.

By promoting local production, the hope was that Ovop would enhance import substitution.

But right from its inception, the programme has proved to be a sick bull being forced to pull a plough.

An important feature of the local Ovop is the size of the groups it works with. Government approves a huge cooperative as an Ovop group, a practice that differs from the Thai model which is based on small community groups.

The participation of cooperatives in Ovop in Malawi is designed to contribute towards improving value-adding processes with relatively small financial inputs and benefiting a large number of participants.

But the large size may have a negative impact on leader-follower relations and women’s participation in the groups.

Assessing effectiveness of Ovop projects

The concept of Ovop is highly hailed in Japan and Thailand where it has significantly contributed to the improvement of the quality of life in communities.

However, the situation in Malawi is a far cry from Thailand and Japan. Ten years after its introduction, there is little to show for the initiative.

Besides high interest rates Ovop charges on its loans, another limitation is poor transport infrastructure that stands in the way of producers’ meaningful participation in national and global value chains.

A value chain includes the full range of activities required to bring a product or service from conception, through the intermediary phases of production (transformation and producer services inputs) to delivery to final consumers and ultimate disposal after use.

The poor road network in the country is unfriendly to the growth of business.

Over and above that, the unfavourable market conditions and financing difficulties are also contributing to communities’ loss of interest in the activities of the project.

In her Master’s degree thesis in agricultural and applied economics at Egerton University in Kenya, Juliana Chidumu said the success of the Japanese Ovop has been based on close urban-rural economic links through consumers and tourists.

Unfortunately, in the Malawian case, even the domestic rural-urban links are limited.

Chidumu said these, plus many other challenges, continue to choke the success of Ovop projects.

She said this is evidenced by the declining number of projects seeking approval and break-up of groups over the past 10 years.

“More than 280 proposals were filed in 2007 alone, with over a 100 being approved. But the number continues to decline due to dissatisfaction with terms and conditions of the loans.

“This is largely because local people had expected that Ovop would provide a structure that makes low-interest loans available, which has not been the case,” said Chidumu.

Ovop national coordinator Kamia Kaluma-Sulumba said the project has a future in Malawi despite facing problems that have seen some groups closing shop.

Kamia-Sulumba said her office is studying the problems and will devise strategies to avert them in future.

One of the initiators of Ovop, former ambassador to Japan Dr John Chikago, said government should detach the project should from the Ministry of Local Government and leave it in the hands of technocrats to run it as a public trust.

“Ovop should not fall under the Executive branch of government. It must be left to operate as a public trust such as the National Initiative Civic Education (Nice) Trust and allow it source funds for different programmes on merit and quality of those programmes,” said Chikago.

But Mmina said it would not be easy for people to fall for the project again having been disappointed by its dealings.

He also feared that Ovop will have difficulties to reclaim its dues from the groups that have disbanded such as Msulauchi.

“Otherwise, worse doom could be awaiting the project because the feeling of people in rural areas towards Ovop is that it is a project that is out to rip us off,” said Mmina.